Local PE prices end 2024 on soft notes in China

China’s domestic PE prices were volatile in the past few weeks. After recording some cautious increases in mid-December, the markets have entered the second half of the month with fresh drops. Firm production costs and capacity losses – driven by maintenance shutdowns – have remained on the table; however, low buying enthusiasm and concerns over growing supply have dampened sentiment further and prompted sellers to issue downward adjustments.

LLDPE yields to price drops after 5 consecutive weeks

Having followed a stable-to-higher trajectory in the past five weeks on the back of relative tightness in supply, LLDPE film experienced rollovers to slight decreases of CNY80/ton ($11/ton) in the week ending on December 20. The local prices were assessed at CNY8320-8800/ton ($1012-1071/ton without VAT) on an ex-warehouse China, cash including VAT basis.

“The availability of LLDPE is quite limited, whereas LDPE is no longer supported by tightness. In the meantime, bearish pressure stemming from sluggish demand and long supply continues to weigh on HDPE film, keeping it behind the former PE film grades,” noted a trader.

HDPE remains weakest among film grades

As per the latest assessment, local prices were CNY100-190/ton ($14-26/ton) lower in a weekly comparison, at CNY7810-8400/ton ($950-1021/ton without VAT) for HDPE film, all on an ex-warehouse China, cash including VAT basis. On the flip side, LDPE retained its outstanding position in the PE film markets, regardless of the latest weekly decline of CNY100-130/ton ($14-18/ton). ChemOrbis Price Wizard reveals that it still maintained huge premiums over LLDPE and HDPE film, at $232/ton and $287/ton, respectively.

Demand lags supply expansion

Unsupportive supply-demand conditions remained an underlying weakness across PE markets, with a source saying, “Traditionally, there is a wave of stocking up before the Lunar New Year, which has yet to be the case this year since buyers mostly focus on need-based purchases. The biggest obstacle is a supply overhang, as demand is unable to keep up with the launch of new production capacities in China.”

Lower-than-expected preparations for spring festivals might be attributed to a broader impact of a fragile economy on end users’ consumption. Meanwhile, a stagnancy due to the ongoing off-season and unstable price trend also crimped demand from downstream converters.

A trader based in Xinjiang noted, “Demand has weakened since downstream factories have reduced their offtake volumes, only purchasing to cover essential requirements. Besides, the fluctuations of PE prices create a cautious attitude among buyers, further dimming their buying enthusiasm.”

Even though domestic inventories exhibited a weekly reduction of 25,000 tons to be reported at 595,000 tons on December 20, supply concerns still made their presence felt due to near-future restarts and startups. The trader added, “More and more plants will resume operations after turnarounds, which, combined with new capacities, will soon result in intense supply pressure.”

ChemOrbis Production News Pro suggests that over 2 million tons/year of PE capacities, which were slated to come online in China by the year-end, will be delayed to 2025, as initial reports suggest that Inner Mongolia Baofeng and Shandong Yulong Petrochemicals have started test runs but on-spec production has not been achieved yet. Meanwhile, Q1 of 2025 is also awaiting to see more massive PE capacity additions of roughly 2.5 million tons/year, unless delayed further.